The Shapers of the Social Empire: Facebook's Advertising Business and Tencent's "Game Plus" Money Way
The following article comes from the Hong Kong stock market , author Wild Sea
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Texts . . . Wild Sea
Source . . . Hong Kong stock spot (ID: hkstocks)
Tencent and Facebook, as the east and west of the social empire, have similar market values, and it is inevitable to be compared to YY their struggle. However, in the author's view that the competition between Facebook and Tencent, similar to the War qin Qiong, but also more similar to the Asian tiger and African lions between the duel, although may be fierce, but because the geographical pattern is more likely to be "wind horse cattle are not comparable." And the author feels more worthy of thinking about why, as the shaper of the social empire, what caused Tencent to rely on games and other multi-channel cash, FB by a single ad can support an empire.
(1) Facebook and Tencent's social empire
According to the latest study, with a population of 7.8 billion worldwide today, 4,021 million people are online, meaning that more than half of the world's population uses social media. With an annual growth rate of 15% and 2.17 billion active users, Facebook is the world's largest social networking platform, and its Whatsapp is the world's most influential social software with 128 countries. WeChat's monthly active accounts also reached 980 million, with FB accounting for four of the world's most popular social media platforms, with Tencent's WeChat accounting for the second-highest number. Facebook and Tencent have become the undisputed super-dominants in the English, Chinese mobile Internet world.
Facebook's social empire is dominated by Facebook, a product matrix, and Facebook's main chain of relationships, The Stream of Information, is a mainstream social platform that showcases friends' dynamics and media content, with whatapps and messengers in the mobile communications category. Whatsap takes the pure communication tool route, with only the chat function, which lives on a monthly 1.3 billion plus. Messenger added basic features such as voice messaging, voice calls and money transfers to whatsapp, and began to slowly become platformed like WeChat. Instagram is part of the photo video interest social app, the month lying 800 million plus.
Tencent has built a double social platform for QQ and WeChat over the years. In terms of the segment of social products alone, Tencent's WeChat and QQ belong to instant messaging, and the circle of friends belongs to the additional information flow products. But Tencent's strength is that it has turned WeChat into a super app, relying on China's high-density territory. If FB's products are specialized in social tool products composed of product matrix, WeChat is a bottom platform products, an APP to carry a variety of functions to solve a variety of needs.
While Facebook's social products are undoubtedly more three-dimensional and comprehensive, in different ways, catering to different groups of people, catering to the different needs of users in different regions, has basically monopolized the global mainstream social market. But WeChat's versatility and platform nature have created an unimaginable stickiness and dependence on WeChat among 1 billion users. There is a survey asked: If your phone, only let install 1 APP software, then what would you install? More than 90% of mobile phone users will choose WeChat!
FB and Tencent are the same polygons of the social world, but in terms of both the number of users and the product, FB is a hopeless winner to Tencent. But Tencent's hegemony is that it builds a super-big ecology with WeChat and QQ as the bottom two products. Established Tencent Video, Tencent News, Literature, Music and other media content portal matrix, built a security, mailbox and other tools such as applications, and has cloud, payment, open platform and other basic services, with traffic back-feeding cash cattle - game business.
(2) Facebook Advertising Business - Tencent's "Game"+"Making money
To say what FB's business model is about making money, it's simple - advertising, fb stakes more than 90 percent of its revenue over the years from advertising, and it's growing over the years. In its latest quarterly results, FB accounted for 98.5 percent of its $12.972 billion in revenue. Facebook is the second-highest-earning company in the world in terms of global online advertisers published by Zethi, with Google at the top of the list.
Facebook's advertising revenue has been cashed out in a simple way, with its pioneering invention of News Feed Ads. Mix ads in your facebook's Friends Feed (Friends Circle), incorporate the presentation of the ad, and adopt a uniform style, making the whole experience more seamless and the ad interesting in the title and content. Later, Weibo, WeChat, today's headlines have adopted this approach.
Facebook's ads play a bit of a bit, we know that Facebook, a company that can get the product to the extreme, FB can give users a picture of their information (region, interest, relationship chain, education) and other 11 dimensions to accurately push ads. This precision orientation technology, FB advertising moat, compared to the domestic micro-blogging this kind of extensive delivery, FB advertising effect is much better, higher fees, single advertising can support its huge market value.
Also in control of the huge traffic portal, Facebook is simply using traffic to sell ads, Tencent is playing a variety of tricks. Games have been the largest in Tencent's revenue, the latest quarter of the financial results, games accounted for 41% of Tencent's revenue, and Facebook's ace -ads, accounting for only 17% of Tencent's revenue, and that 17% of the proportion of the big or Tencent video media ads. In other business esbusiness, social network revenue (video paid viewing, music membership, live streaming revenue, etc.) accounted for 24%, online advertising revenue was 17%, and other revenue accounted for 18%.
Although in the Chinese market, Tencent occupies almost all of the mobile portal traffic mark, WeChat and QQ, games, music, video, payment... Tencent is inthes or out, but Tencent is only deeply in the Chinese market, its radiation and user size is far less than FB. Both are close to the product sector and market value and revenue.
Why did Tencent play itself as an eco-empire, and FB didn't choose to cash in through multiple channels like Tencent?
Why does Tencent, backed by China's 1.4 billion users, create value of almost 2 billion users on Facebook?
(1) The genes of the two are different: FB rely on products and technology to seal the god, Tencent rely on the business model to dominate
In May 2007, Facebook, which had 132 million active users at the time, opened its platform, Facebook Platform. With this framework, third-party software developers can develop apps that integrate with Facebook's core features, and target apps and game products that are of interest to users. Facebook quickly completed the transformation of the site to the platform, and the FB open platform decided that it could only be a neutral, rather than being involved in fostering the children and grandchildren of its own faction.
Facebook's move is certainly not going to be a win-win for startups, but it's done with data accumulation and industrial chain by contributing traffic and gaining a more comprehensive view of users' data. FB today has the amount of data and accurate user analysis technology, this open source has important reasons. And our travel data on The Goethe, the dining data on the United States, the relationship chain data on WeChat, these data are difficult to cross two years ago ... So WeChat friends circle advertising and FB compared to the extensive style, also can not afford to accept the price.
Why can FB be one of the most global companies? This has important reasons for the architecture of its product matrix. Different regions have different cultures, and infrastructure such as the Internet has different levels of penetration. Facebook and instragrm products can capture the developed countries such as North America and Europe, they are the same English-speaking countries, culturally similar, have similar interests.... And why whatsapp can become the most widely covered product (127 countries)? Whatsapp design is extremely simple, in addition to instant messaging, there is no extra functionality, easy to operate, the use of very low threshold (on the internet speed, mobile phone running memory requirements low), to know in India, Southeast Asia, In less developed regions such as West Asia, the average speed of the Internet is less than 10 mpbs.
Instead of being able to integrate the core features of its four social products, Facebook's social culture in Europe and the United States and its vision of globalization dictates different trade-offs for different users.
Tencent's short board is technology, which started late. BEFORE THE 3Q WAR, TENCENT, LIKE FACEBOOK, SPECIALIZED IN SOCIAL PRODUCTS, BUT TENCENT'S TECHNOLOGY GENES WERE REALLY GENERIC AT THE TIME. Basically see who's good at home products, give a copy a similar function (similar to facebook copying sanpchat). Tencent, without the technological advantage, is hard to beat Baidu like Facebook does against Google. So in terms of traffic realisation the most efficient advertising (search), Tencent lost, picked another cash cow - the game. Of course, this is also with Facebook early on there was capital intervention, regardless of blood-making, first consider the product to the ultimate harvest users. Tencent's early listing is related to strong cash-out pressure.
And Tencent experienced 3Q war, pain. Tencent executives understand QQ (including later WeChat), a social network based on the underlying address book, not Tencent's cash cow, but the soil on which Tencent's future cash cow depends. Tencent does not have to pay for people who enjoy QQ (WeChat) services, as long as the best efforts to let users satisfied, let users stay on top is enough, Tencent to find ways to improve the user's products stickiness, and WeChat globalization for Tencent cash, the significance is not as big as Facebook.
Behind Tencent explores the most effective business model for a connected person, becoming a connectivity platform that takes advantage of the strong cash flow generated by traffic-feeding games and the location of its traffic portal, and forms a strong eco-empire route in the entertainment, finance, business and other aspects of the layout.
Product innate genes determine what kind of road a company goes, there is a certain truth!
(2) The market characteristics of the two are not the same
Why can Tencent, which has 980 million users, create value that is almost as valuable as Facebook's 2 billion users?
This has a lot to do with the market they choose!
To quote Mr. Yan Sheng, a former deputy editor of Forbes, the concentration of users and the weight of the value chain/value network determines that Tencent and FB are on a different path.
Facebook, though, can rely on the English language family and the world's mainstream American culture. But the national conditions and culture of each country is still very different, Facebook, although the radiation range is wide, but the user's low concentration, can only make highly universal products (such as WhatsApp) to meet the needs of all people, and WeChat relies on China as a single market, Users' habits and enjoyment of the infrastructure and cultural background is highly consistent, the scale of users is high concentration, such as WeChat super AP, because our large population also has a "universal" fit in our circle.
For example, if Facebook wants to do offline payments like WeChat, it needs to take care of banks and countless businesses around the world, which is much more expensive than WeChat faces in the Chinese market, and because of its relatively concentrated population and cultural consistency, Make it easier for Tencent to educate its users (e.g. sweep ingdimensional code).
Simply put, it is the geographical and cultural proximity of Chinese users, allowing Chinese companies to intervene more commercially, thus generating more revenue. Facebook is targeting a global market with huge potential users, but with huge cultural differences in each market, and it's difficult to do a lot of value chain/value networks, making advertising the lightest business model, which also determines that Facebook can't realize multiple channels like Tencent.
(1) Tencent's Growth Potential: Deep-into China's Internet Dividends
The author has never worried about Tencent's growth potential, on the book alone on this piece of the game, there is great potential. Compared with rival NetEase, Tencent's hand-travel ratio should also have a lot of room for improvement (NetEase's mobile games account for 68%, Tencent's 67%, but given Tencent's mobile traffic advantage, this proportion is likely to be greatly increased).
But the author believes that today's Chinese market to Tencent such a super valuation, and its creation of the ecology is closely related. Tencent's investment companies over the years have planted the seeds. This is an important step for Tencent from "game empire" to "financial empire"!
Of Tencent's $237.7 billion in investment assets, investments in affiliates and available-for-sale financial assets are the core. The former has 104.9 billion, while the latter is 124 billion, with a total of 228.9 billion, accounting for about 96% of total investment assets. The focus is on up to $124 billion in equity investments, including $52.3 billion in listed companies and $69.8 billion in unlisted shares, which Tencent has classified as available for sale. This is the fruit of these years crazy buy-to-let! Equity means sharing the profits of the invested company.
Today Tencent is a connectivity platform that is the gateway to traffic. Any APP wants to get users, basically can not bypass Tencent this "platform", Tencent is not only a service provider, but also a B2C linker. To this extent, Tencent can rest assured that bold to collect taxes, from a group of startups, pick out excellent and promising, focus on fostering their own children and grandchildren!
Tencent is now an empire similar to Berkshire Hathaway, relying on existing businesses and employing a group of people with high reputations and successful experience in the Internet and mobile Internet as managing partners (mainly the following dozen heads). This year's reading and public listing, is Tencent investment began to harvest the horn, there are many after!
(2) FB wide spread network, net, cash, cash ...
Based on its existing core (money) business, Tencent makes more money than Facebook, which has a higher ceiling than Tencent.
At this stage, Tencent's cash flow mainly depends on games, social networking services revenue (various recharge) it two accounted for the big, advertising, payment, cloud services these accounted for relatively small. The amount of time users spend on their products, and the ceiling of money investment, determines the ceiling of Tencent's performance. Facebook's ceiling, in addition to the number of users and the length of time spent, is also closely related to the economic situation in the countries covered, Facebook, although the business is single, but doing 2B business, than in its coverage of the country is extremely vast. Its owners are the world's fat and rich enterprises.
FB is now largely cashed out in North America by Facebook and Instagram, and the rate of local cashines in Europe is still low. Let's look at FB per capita contribution revenue map, the author thinks there is a strong reference. The highest regions were the United States and Canada, with per capita contributors of $26.76. Europe's per capita contribution revenue was $8.86, the second-highest in Asia, with $2.54. While this is related to different levels of economic development in different regions, the strong contrast between Europe and Canada shows, on the other hand, that FB is not commercially commercialeist enough in many regions around the world. That's why Xiao Zha dares and flower street calls to increase the dynamic proportion of relatives and friends on Facebook.
Although the same social empire, but Tencent and FB different cash-out channels and business models, decided that they are like the jungle tigers and the lion on the grasslands, although they are kings, but geography and ecology, decided that they are difficult to have a kind of fight, they are more likely to be sorry, learn from each other (shan) xi ( zhai). Tencent's opponent is Ali, FB's opponent is Google!
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